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Exam 1: Accounting in Business

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Question 151

Multiple Choice

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The expense recognition principle,also called the matching principle:

A) Prescribes that accounting information is based on actual cost.
B) Provides guidance on when a company must recognize revenue.
C) Prescribes that a company report the details behind financial statements that would impact users' decisions.
D) Prescribes that a company record the expenses it incurred to generate the revenue reported.
E) Means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.

F) A) and B)
G) D) and E)

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Question 152

Multiple Choice

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The following is a list of selected users of accounting information. Match the appropriate user to the following decisions they make with accounting information. -Know what,when,and how much to purchase.

A) Purchasing Managers
B) Lenders
C) Suppliers
D) Regulators
E) Shareholders

F) A) and B)
G) None of the above

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Question 153

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Financial accounting is the area of accounting aimed at serving external users by providing them with general-purpose financial statements.

An external transaction is an exchange within an entity that may or may not affect the accounting equation.

Investing activities involve the buying and selling of assets such as land and equipment that are held for long-term use in the business.

Creditors' claims on the assets of a company are called:

Increases in equity from a company's sales of products or services are:

The accounts of Odie Company with the increases or decreases that occurred during the past year are as follows: $\begin{array} { l l l } \text { Account } & \text { Increase } & \text { Decrease } \\\text { Cash } & \$ 25,000 & \\\text { Accounts receivable } & & \$ ( 5,000 ) \\\text { Accounts payable } & & ( 11,000 ) \\\text { Notes payable } & 16,000 &\end{array}$ Except for net income,an investment of $3,000 by its sole stockholder in exchange for common stock,and a dividend of $11,000 to its stockholder,no other items affected equity.Using the balance sheet equation,compute net income for the past year.

If equity is $300,000 and liabilities are $192,000,then assets equal:

Decreases in equity that represent costs of providing products or services to customers,used to earn revenues are called:

________ explains changes in the stockholders' claim on the business's assets from net income or loss,and dividends over a period of time.

Generally accepted accounting principles are the basic assumptions,concepts,and guidelines for preparing financial statements.

Zippy had cash inflows from operations $60,500; cash outflows from investing activities of $47,000; and cash inflows from financing of $25,000.The net change in cash was:

The International Accounting Standards Board (IASB) :

Rico's Taqueria had cash inflows from operating activities of $27,000; cash outflows from investing activities of $22,000,and cash outflows from financing activities of $12,000.Calculate the net increase or decrease in cash.

Marsha Bogswell is the sole stockholder of Bogswell Legal Services.Which accounting principle requires Marsha to keep her personal financial information separate from the financial information of Bogswell Legal Services?

Which of the following accounts is not included in the asset section of the balance sheet?

Risk is the uncertainty about the return we will earn.

A limited liability company offers the limited liability of a partnership or proprietorship and the tax treatment of a corporation.

Verity Siding Company,whose sole stockholder is S.Verity,began operations in May and completed the following transactions during that first month of operations.Show the effects of the transactions on the accounts of the accounting equation by recording increases and decreases in the appropriate columns in the table below.Do not determine new account balances after each transaction.Determine the final total for each account and verify that the equation is in balance.